Project Report on Profitability Analysis

An empirical approach has become very popular during the recent years. The reason
for the growing popularity of the subject is that it primarily concerns with the concept
and techniques of the analysis of profitability which can be advantage only used by
managers, creditors, owners.
Analytical and critical assessment of the various aspects of financial principles helps
judicious application of assets and enables to take right decision at right time. A
comprehensive idea is gained to run day to day business in proper perspective.
The significance

of

production/operation,

marketing,

finance

and

personnel

management is being increasingly realized in modern-corporate world both in India and

abroad.
This realization has come into light because of increasing complexities of the task of
managers and administrators. These branches of management help the managers to
reach the objectives of an organization.
A study of these management activities enables the people, engaged in either small
size unit or a large core industry, to understand their objectives and the way how to
achieve them successfully.

Profit & Profitability

1.

Concepts of Profit :

Profit plays an important role in every business organization and its determination is
really a tough one. Profit is not only concern with the proprietors but also income-tax
authorities, managers, directors etc. because all of them are get a percentage of net
profit. Even the accountants are not unanimous on this matter.
Now question arises, "What is Profit?"

Law and even the accountants have not defined the word "Profit". Generally speaking
"The Profit of Business during a given period is the excess of income over expenditure
for the period." It may arise from other sources.
Maximization of profit has ever been one of the important goals of every business
enterprises. The existence, continuance and expansion of business depends, to large
extent, on its capacity to earn a good amount of profit every year.
The efficiency of a business is measured by the amount of profit earned. A company
should earn profits to serving and grow over a long, period of time. The adequacy of
profits says Korn and Boyd. "Underlies the entire financial structure of a firm. Only if a
company to earn profit will it survive in the long run.
Profits are essential, but it would be wrong to assume that every action initiated by the
management of the company should be aimed at maximization of profits, irrespective of
social consequences. "It is unfortunate that the word profit is looked upon as a term of
abuse since some firms always act to maximize profits at the cost of employee's
customers and society."
There are three concepts of profit :
1.

Economic Profit

2.

Accounting Profit

3.

Social Profit